It was supposed to be just an inconvenience but now there are signs of serious economic distresss

Nearly two weeks since the demonetisation of Rs 500 and Rs 1,000 notes, Indians are still struggling to make sense of the dramatic decision. The most visible impact of the move to make 86% of currency notes in circulation illegal has been the long queues outside bank branches and ATMs across the country as people try to exchange their cash for new notes. But it is slowly becoming clear how this deliberate liquidity crisis is affecting every bit of the economy.

The network of ATMs in India have a pronounced urban bias. While there are over 2 lakh ATM machines in the country, Reserve Bank of India data shows that at least 70% are in the urban areas. In addition, an estimated 65% of all bank branches are in cities and towns even though 62% of the population lives in villages. As a result, currency notes are taking much longer to reach the rural population, which is dependent on cash for most transactions.

The resultant distress has already begun revealing itself in many ways.

Rural markets and small traders: In rural markets in North India, the demonetisation shock has led to a sharp decline in both supply and demand of commodities. The empty markets have created a vicious cycle. Consumption has gone down due to unavailability of the legal tender.

The decreased demand means that profits of traders and farmers has been hit. Farmers are reluctant to sell their produce for the old notes since they would need the new ones to get ready for the next harvest and exchanging substantial amounts of the old currency was impossible due to withdrawal limits prescribed by the RBI.

Farmers:For farmers, even feeding their cattle has become a huge problem since it has become difficult to buy fodder. In Kerala, milk societies have warned of a marked decline in procurement as there is no cash to pay the farmers. Cashew plantations have stopped paying wages to agricultural labourers. The state’s strong network of primary cooperative banks has slo been severely hit by the withdrawal limits.

Elsewhere in Tamil Nadu, the state government said that the disbursement of crop loans to farmers has been affected and this could hurt food production. Coming against the backdrop of the Cauvery water crisis, the cash crunch could cripple farmers of the delta region in Tamil Nadu.

Trucks and cargo: Truck movement has taken a beating, adding to the supply woes. Industry groups say about 60% of trucks plying on roads have been affected by the cash crunch, which means cargo simply isn’t getting to its destination.

Labourers and the poor: For industrial labourers, the drying up of cash has meant that their wages were delayed. With withdrawal limit of Rs 50,000 per week for current accounts, businesses that pay wages in cash are strapped. Even in cases where the employers have managed to pay through bank accounts, labourers find it hard to access the money since they could not afford to skip work to stand in queues at banks for hours.

The demonetisation has even affected the eating habits of the poor. Left with no cash, those like the adivasis of Dhasai in Maharashtra are living on bare minimum and have even cut down on consumption of vegetables.

Banks: This is somewhat counter-intuitive, since banks are having to work overtime to handle the huge pressure of having to exchange or hand out money to the vast majority of the population, but this has meant that regular bank business – giving loans, assessing credit-worthiness, clearing cheques – the sort of stuff the economy runs on, has ground to a halt.

Tough road ahead

The sheer scale of demonetisation, aimed at curbing illicit money and fake notes but coupled with an attempt to force people to use the banking system, is hard to comprehend, since the policy affects just about every single Indian citizen and many others too. The Supreme Court on Friday noted with some degree of worry that riots could break out if the suffering due to demonetisation did not abate. Realising this, the government has decided to send more than two dozen teams of two or three bureaucrats to go out on field visits in every state to understand how demonetisation has been affecting them.

Even that might be inadequate. Whatever the aims of the scheme, it is clear its impacts will be massive and hard to predict, since the cascading effects of such a big liquidity crunch could travel deep into the system. Unless cash supply is set right quickly, the distress could deepen. It will take years to fully understand the effects of this shock to the economy, which politicians have insisted is just a “temporary inconvenience”.

The government has tried to repeatedly hide this colossal failure behind good intentions. Demonetising 86% of currency notes in a country where 90% of all transactions are done in cash hardly seems to be the smartest way to smoke out ‘black money’, only about 6% of which is held in cash.

The justification around demonetisation has been spun around familiar tropes; one ‘the economy’ and other ‘the people’, where ‘the people’ have to suffer inconveniences to rid ‘the economy’ of black money. What is the economy if not for the people?

Rallying around ‘black money’ generates greater political benefits than economic ones. In chasing this illusive villain, the government spins a Robin Hood narrative for itself – robbing the rich to help the poor. The redistributive effects of demonetisation are narrated simplistically – no black money means better welfare for the poor. This cannot be further away from the truth. Let’s be clear – with or without demonetisation, the rich would remain rich and the poor would remain poor. Demonetisation has, at best, made a few very rich people a little less so.

Overnight, the cash economy has been discredited. There is a lazy and misleading link being made between cash and black money, vilifying the people, mainly the poor, who overwhelmingly rely on and almost exclusively transact and save in currency notes. The rural economy and the informal sector, which employ most of the poor, have been paralysed. We
have used a cannon to kill a fly and made the poor cannon fodder.

It has emerged, through whispers of course, that besides the Prime Minister no more than four officials were in the loop, and the Chief Economic Adviser was not among the four!

I am obliged to return to the subject of ‘Old Notes for New’ because the hardship and suffering of the people continue. It is now clear that the decision to demonetise notes of Rs 500 and Rs 1,000 was ill-conceived, the preparation was terrible and the implementation was horrible. It has also emerged, through whispers of course, that besides the Prime Minister no more than four officials were in the loop, and the Chief Economic Adviser was not among the four!

Horrendous consequences

Look at the disruption:

1. About 86 per cent of the currency in circulation was declared ‘illegal tender’ in one fell swoop, leaving practically no money with millions of people. There was no money to buy milk or medicines, pay for an auto or taxi, or buy vegetables or grain. I know people who went without a meal for a whole day because no eatery would accept a Rs 500 note.

2. There are 1,34,000 branches of banks in the country. Add 2,15,000 ATMs of which about 40 per cent were working. Assuming that 500 persons, on average, stood in line outside each branch or ATM, every day more than 11 crore people spent hours standing in a queue to exchange notes. Most of them were working people. Calculate the impact on production and productivity.

3. For some inexplicable reason, cooperative banks were not allowed to exchange the notes. Millions of farmers could not deposit or withdraw money and, in the sowing season, there was no money to buy seeds or fertilisers or hire labour.

5. Industrial hubs such as Tiruppur, Surat, Ichalkaranji etc ground to a halt because there was no money to pay wages to the workers and no money to pay for ancillary and support services like transport.

6. About 33 per cent of all employed persons are casual labourers (estimated at 15 crore). Suddenly, they found themselves without work because those who employed them could not find the money to pay wages.

7. Brokers and touts sprung up offering to exchange the ‘demonetised’ notes for a price. Men and women, without regular work, offered to stand in line to exchange notes for a fee. Honest people turned dishonest to get some money. The government’s response was to use indelible ink to mark the finger. It could have added a voting machine and converted each bank branch and ATM into a polling station!

Ignorant boasts

The pain and suffering will continue because it will take months to print 2,200 crore notes of the new series to replace the old series and because of the limitations of bank staff and the ATMs (yet to be recalibrated). Meanwhile, the boasts of the government will unravel:

WILL DEMONETISATION END BRIBERY? Of course, not. Those who will take bribes will take them in the new notes. A case of bribery was reported from Gujarat where two officials of the Kandla Port Trust were caught receiving 124 notes of Rs 2,000!

WILL IT STOP COUNTERFEITING? Of course, not. If one human can print notes with new security features, another human can find a way to copy those features. The most counterfeited currency in the world is the US dollar. One way to combat counterfeiting is to phase out, periodically, old series of notes and introduce new series and try to stay one step ahead. The last time we did that was in January 2014.

WILL IT PLUG GENERATION OF BLACK MONEY? Of course, not. Sectors which are prone to use unaccounted money (wholesale trade, construction, jewellery, higher education, election funding etc) will continue to demand unaccounted money and, therefore, ways will be found to supply unaccounted money.

No major economy is entirely free from the scourge of a black or shadow economy. According to a World Bank study, the shadow economy in the US is 8.6 per cent of GDP (or about USD1,600 billion); in China 12.7 per cent (about USD 1,400 billion); and in Japan 11 per cent (about USD 480 billion). India’s shadow economy is estimated to be USD 500 billion (22.2 per cent of its GDP of USD 2,250 billion). It is large, but not unusual, and the good news is that its size is shrinking. Brazil, Russia and South Africa have larger shadow economies; Israel and Belgium are comparable.

Demonising cash

The Prime Minister seems to have bought the idea of a cashless economy and decided to wage a war on cash. His supporters called it a ‘surgical strike’, little realising that the bulk of the money transactions of the people of India are legitimate and in cash — and will be in cash for a long time — for many reasons. Let me share one crucial data point: for 133 crore people, at the retail level, there are only 14,60,000 Points of Sale (POS)! Cash to digital is a long journey. The ‘surgical strike’ post-Uri was intended to put an end to infiltrations, but the reality is that there has been a three-fold jump in infiltrations (as admitted by the government).

The ‘surgical strike’ on currency has resulted in the immiserisation of millions of people and bringing many sectors of the economy to a grinding halt. I shudder to think what the next ‘surgical strike’ will be and what dreadful consequences that will bring.

The BJP MP spoke on the issue of demonetisation in a series of tweets in which he said that people must not get carried away by 'planted stories'.

In an apparent attack on PM Narendra Modi’s demonetisation move and his mobile app survey that threw up favourable results, Shatrughan Sinha Thursday called to get into the “depth” of the issue. Taking to Twitter, the BJP MP, who has lambasted the central government on several occasions earlier, said that “well-intentioned savings over many years of our mothers and sisters for emergency can’t be equated with black money”.

Sinha, in a series of tweets, said people must not get carried away by “planted stories & surveys conducted by vested interests”.

“Let’s stop living in a fools’ paradise and getting carried away by planted stories & surveys conducted by vested interests. Get into the depth of the subject. Must understand the pain of the poor, suffering, well wishers, voters, supporters & women. Hard earned & well Intentioned savings over many years of our mothers & sisters for emergency can’t be equated with black money (sic),” Sinha said.

A day after he announced an online survey to gauge people’s response to the government’s move on demonetisation, Prime Minister Narendra Modi released the results on Wednesday which showed that more than 90 per cent respondents supported the decision on all counts.

The result drew immediate response from the Opposition, with Congress alleging that the survey, conducted via an official app of Prime Minister Narendra Modi, to gauge public opinion on demonetisation comprised “manufactured questions and pre-fabricated answers by blind bhakts”.

Are we heading towards an authoritarian regime that curbs our freedom to spend our own money?

“We do not want another ‘god’ as the political leader of our country… We must not only not have any more gods…we must also ‘devalue’ the exaggerated importance that we have given to the office of Prime Minister.”

Here is a regime — whose senior-most impresarios take considerable pride in micro-management and have built up a formidable reputation in Gujarat as control freaks — but they were also callously inattentive to the post-demonetisation dislocations. The very arbitrariness and the resulting chaos are being sought to be palmed off as “worth the pain” because prime minister Modi “means well”.

No one is sure of the extent to which the finance minister – let alone the rest of the cabinet members – was privy to this so-called ‘surgical strike’ on black money. The country remains in the dark about whose counsel the prime minister sought while firmaning this most drastic and draconian change in currency notes.

This unhealthy concentration of power and authority in one man can only be a recipe for unhappy consequences. Already the blue-book of the personality cult is operational. Ideological, political and moral approval is sought for the prime minister and his “bold” move. Anyone disagreeing with the ‘Leader’ is being called a habitual dissenter, a fake secularist, and a potential “deshdrohi”. Anyone dissenting is dismissed and ridiculed as an accomplice of the corrupt and the terrorist.

The officials down the line have interpreted this kingly intolerance as a simple license to shut people up. For example, in Indore, the local officials have outlawed any criticism on the social media of the demonetisation decision because they think “internet social media wars” could disrupt social peace. The ‘Leader’ can disrupt the daily lives of the millions and millions of citizens but no citizen can have a right to share his/her plight, or vent anger about being denied one’s own money. On the other hand, the PMO uses that very social media to conduct an opinion poll of its own and claims wide public approval for the demonetisation move.

Why was one individual – howsoever popular, wise and honest – allowed to undertake this experiment in monetary Stalinism? Collectivist impulses of the state have been let loose. Millions and millions of households have been forced to surrender their meagre savings to the banks. The mopped-up savings will now be available to the omnipotent sarkar, to be dispersed as per the preference of the ruling clique.

The minatory penetration of a Leviathan state is complete and total even in the remotest part of the land; each day the state issues firmans on how much and how a citizen can use his own money. All because the ‘Leader’ wanted to be “bold” and to “transform” India, like no other Indian leader had done these last 70 years.

In the best of the Stalinist traditions the (virtual) mobs are being encouraged to denounce anyone who dare question the ruling regime’s preferences and priorities. We are manufacturing new orthodoxies: any governmental initiative – good, bad or malevolent – will not be questioned if it is declared to be in aid of fighting “corruption, black money, terrorism and counterfeiting of currency.” It is demanded of the citizens that they put up with the “inconvenience” in “our fight” against these presumed objectives.

Now, we have witnessed a new experiment with a democratically elected king putting his hand in the subject’s jeb (pocket). Consequences will be there.

It would appear that the BJP bought acres and acres of land in Bihar till the first week of November, just before Prime Minister Narendra Modi announced demonetisation on November 8. A report by Catch News today, alleged that the BJP has bought land worth crores before announcing that Rs 500 and Rs 1000 notes are no longer valid. Catch News claims to have the deeds of ten such transactions done by BJP functionaries on behalf of higher-ups in the party, including party president Amit Shah.

Sensex up just 6.5% while the best returns were during Manmohan Singh, with the Sensex soaring nearly 167.5%

In the two-and-a-half years that the government led by Prime Minister Narendra Modi has been in power, the Sensex has delivered only 6.5%, despite the initial rally.

An analysis of the mid-term returns of previous seven governments since 1980 showed this was the second-worst.

The worst return was during another National Democratic Alliance (NDA)-government. The 30-share Sensex, an index of country’s blue-chip companies, had dropped over 30% in the first 30 months of former prime minister Atal Bihari Vajpayee’s government, which took charge on October 13, 1999.

The best returns were during Manmohan Singh, with the Sensex soaring nearly 167.5%.

Mr Modi, a Hindu nationalist, was for a decade an international pariah over his alleged role in the mass murder of Muslims in a region he once administered. He wants to be known for something else. President-elect Trump offers an opportunity to recast himself. Two years ago Mr Trump’s svengali, Steve Bannon, described Mr Modi’s victory as part of a “global revolt”. But a looming cash crunch and an administrative crisis makes it look like the revolt might start at home.

The story, carried by The New York Times and others, states that the move spells “chaos” for India’s ordinary citizens. "Basically, you've created chaos," the story quotes Steve H. Hanke, an applied economist at Johns Hopkins University in Baltimore and a global authority on currency policy.

It is unclear whether this exercise will achieve any lasting results other than having created a national economic crisis, destroying confidence in the national currency and unleashing tremendous suffering for ordinary Indian citizens

The surprise scrapping of what amounted to 86% of the cash in circulation could, in fact, turn out to be the worst mistake of Mr Modi’s career.

What seemed at first to be a masterstroke by Prime Minister Narendra Modi now looks like a grave miscalculation.

Life has become difficult for Doordarshan journalist Satyendra Murli since he claimed Prime Minister Narendra Modi's address to the nation announcing demonetisation was recorded and not live telecast.

Murli claims to have been getting death threats over the phone, with some callers allegedly threatening to abduct him. He has also become the target of a vicious hate campaign on social media; his Facebook page is flooded with abusive messages.

Murli had told a press conference at the Press Club of India, Delhi, on 24 November that Modi's 8 November speech had been pre-recorded."I had publicised my cellphone number during the press conference. Most of the calls I received after the conference were congratulatory, but dozens of callers issued threats and hurled abuses at me," the journalist told Catch.

Murli has apprised Doordarshan officials about the matter, but has refrained from filing a police complaint for "personal reasons". "I am taking measures to protect myself," he said.

The day after his press conference, Murli reported to the Doordarshan office at Copernicus Road, Delhi, for his 1.30 pm shift. An hour later, he was called to meet the newsroom director and left for home at 5.45 pm. Apparently, a colleague warned that Murli could be manhandled in the office, so he'll no longer work the "routine shifts". Murli, who is from Jaipur, has been with Doordarshan since 2013.

Speaking to Catch, Murli reiterated that Modi's speech had not been telecast live, and insisted that he had enough evidence to prove the allegation.

GOING TO COURT

He's now preparing to take the matter to court and has approached a Supreme Court lawyer for representation.

Asked why he made the allegation two weeks after the speech, Murli claimed he had been gathering evidence. Now, he claimed, he possesses documentary, audio and video proof.

A few people working at DD whom Catch spoke with confirmed Murli's accusation. One person claimed his boss had told him this over the phone.

Here are Murli's claims:

1. The prime minister's speech was written many days before it was telecast. There is ample evidence to prove it was recorded and edited before being aired.

2. The media was asked to telecast the speech on the live band. All news channels, including Doordarshan, followed the instruction.

3. It follows, thus, that the decision on demonetisation had been taken well in advance. The government's claim that the Reserve Bank of India sent its formal recommendation to withdraw Rs 500 and Rs 1,000 notes only at 6 pm on 8 November and the cabinet approved it at 7 pm is bogus.

4. An examination of the video footage of Modi's speech reveals several editing cuts, which were hidden with visual effects.

NO REPLY TO RTI APPLICATION

Murli alleged that the decision on the speech was taken by the PMO. But it refused to answer his RTI query about this. Instead, the RTI application was forwarded to the I&B ministry and the finance department.

Murli has raised the following questions in his RTI application:

1. Was the prime minister's speech telecast live on the evening of 8 November?

2. If so, the raw footage of the speech must be released or permission granted to view it.

3. When was the decision of demonetisation taken? All the related documents must be made public.

4. When was the decision to print the new Rs 2000 notes taken? The relevant documents must be made available.

5. Were The Government of India (Transaction of Business) Rules, 1961 and the provisions of the RBI Act, 1934 followed in this regard?

Modi's ads cost the taxpayer Rs 1100 crore. Twice as much as Mangalyaan

The Union government has spent over Rs 1,100 crore in two and a half years on advertisements featuring Prime Minister Narendra Modi, a RIght to Information (RTI) query revealed.

This expenditure was between 1 June, 2014 and 31 August, 2016, according to information provided by the Union Information and Broadcasting Ministry in reply to an RTI application filed by activist Ramveer Singh.

The expenditure comes to about Rs 1.4 crore a day.

To put the figure in perspective, it is more than double the cost of the India's Mars-mission. Mangalyaan, hailed as the world's cheapest inter-planetary mission, cost India just Rs 450 crore.

This expenditure is only for 'telecast/television, Internet and other electronic media' and does not include other platforms like print advertisements, hoardings, posters, booklets and calendars. The total sum will be many times higher if these costs are also factored in.

'Fear is also a great impetus to push people in the right direction.'
'So, everyone who has touched black money is scared and I'm very happy about it.'

The government's move to scrap Rs 500 and Rs 1,000 notes would be good for the economy in the long run, says Aditya Puri, managing director, HDFC Bank.

According to him, the worst is behind us, in terms of long queues and inconvenience, and that the focus should now shift to the advantages arising out of it.

I don't have the guts to say there is no pain, but then let's look at it in two ways -- transition and long run.

Transition is 50 days when the currency has been pulled out and has to be put back.

The RBI is printing new currency at full capacity. We will be back to normal once the old currency is removed and that amount of currency minus black money is put back in the system coupled with digitisation.

Yes, there was a combination of issues such as people misusing the banking system and then creating shortages, people making a lot of noise and not creating normalcy and long queues etc, but the worst is behind us.

You have to understand that if secrecy was required, there would be some pain.

Between the government, RBI and the banks, we have tried very hard to minimise the pain.

We have come very far in a short period of time. Now, everyone should pull their weight in making it work and it;ll work in the long run.

Reality check for bhakts: Narendra Modi is not TIME's Person of the Year

Prime Minister Narendra Modi's followers do not need much reason to sing praises for their 56-inch chested leader. So when he receives an award, their praise and adulation for their chosen one knows no bounds. Even when it's a fake UNESCO title awarded by WhatsApp rumour mongers.

So when he actually wins something, like the TIME Magazine Person of the Year reader's poll he won today, it's no surprise that it's heralded as an occasion for celebration

All of bhaktdom was cheering. Modi bhai was TIME Magazine's 'Person of the Year'! Soon, as with all things related to our Fearless Leader, it began to trend on Twitter.

Even a newspaper as respectable as The Financial Times ran with the headline, "Prime Minister Narendra Modi wins TIME magazine's 'Person of the Year".

Mitron, India had finally made it! Except, no. Not really. And let me tell you why.

THIS WAS JUST A READER'S POLL

Regardless of the earnestness with which his followers have reported the news, Narendra Modi is not TIME magazine's 'Person of the Year'. Or not yet, anyway. He did win, but what he won was an online poll open to readers.

The winner doesn't get a prize or a spot on the TIME cover. Heck, they don't even get a cake. What they do get is a little more visibility than normal, which is fine, but nothing to really write home about. After all, the poll's first real winner was WWE star, Mick Foley(With 50% of the vote, far more than Modi's 18%).

ONLINE POLLS ARE EASY TO MANIPULATE

In 2014 alone, the ease with which these polls could be manipulated was illustrated by TIME's own TIME 100 list.The list, which was open to online voting, saw Arvind Kejriwal and Narendra Modi emerge as the two most influential men in the world. This, at a time when Kejriwal was not Delhi CM and Modi was still campaigning for PM.

Modi had apparently finished first with 50,70,865 votes. Kejriwal followed with 31,68,259 votes. However, when TIME double checked, they found that most of the votes for both candidates were fake - the result of either bots, duplicate votes or bought votes.

Once the dust had settled, each candidate was left with a fraction of their original votes - Kejriwal with 2,61,114 and Modi with 1,64,572.

Since then, online poll manipulation has only gotten easier thanks to proxy servers and technology. His online team is also wiser about scamming TIME than they were 2 years ago. Who's to say the poll wasn't manipulated this time around? Modi's online cohorts certainly have a dubious track record on the issue.

PM Modi accepts demonetisation is a blunder in meeting with Telangana CM KCR

The Prime Minister said things should improve soon, he asked KCR to support the move at least in public

Prime Minister Narendra Modi has said that he blundered by demonetising Rs 1000 and Rs 500 notes without much thought. The Prime Minister made this admission to Telangana Chief Minister K. Chandrasekhar Rao (KCR) when the latter met him on November 19.

KCR had met the PM to say he was in deep trouble after demonetisation as Telangana didn’t have new notes and said the situation was very bad in Hyderabad and the rest of the state. He had said people were standing in queues to deposit their old money for new notes, which were fast running out.

The meeting between Modi and KCR, which was to be for 25 minutes initially, went on for a full one-and-a-half hours. KCR said the situation in industrial and agricultural sectors were badly impacted with entire industrial work grinding to a screeching halt and farmers unable to hire labourers since they were either in queues for the new currency or the farmers couldn’t pay labourers their wages.

KCR is said to have told the PM that given such a precarious position in Telangana, the state will not be able to pay its share of taxes and other revenue to the Centre.

Once KCR listed his many grievances, the Prime Minister admitted demonetisation was itself a blunder and that he should have paid much more attention to it before introducing it, said a source who knew about the meeting. Though the Prime Minister said things should improve soon, he asked KCR to support the move at least in public. Modi is said to have assured KCR that Nitin Gadkari, the road transport and highways minister, and Piyush Goyal, the power minister, will announce new projects in the state to help tide over the crisis.

The Modi-KCR meeting lasted so long that Army chief General Dalbir Suhag, who was waiting to meet the PM, was told the meeting was not possible due to some urgent circumstances, after which the General left.

This is the first reported occasion of Modi admitting the blunder in demonetising old high-value currency, which constituted 86 per cent of the currency in the country. Otherwise, the Prime Minister has defended demonetisation tooth and nail in public, calling opposition leaders, who protested against his move, corrupt as well.

A top economist from Israel, who is among the Prime Minister’s economic advisers, has also told Modi that the decision was enormously wrong. Several experts, both in India and abroad, have decried the decision. These include Nobel Economic laureates Amartya Sen and Paul Krugman, who was in Delhi for the Hindustan Times Leadership Summit. But the PM hasn’t acknowledged his error.

Till date, 83 people have died either because they were turned away since they didn’t have new notes, or committee suicide fearing their entire life savings have been blown away by demonetisation, or died in queues either to withdraw money from the ATM or from the bank, or exchange money, which has since stopped at banks despite the prime minister assuring the citizens of India that they could do so until December 30.

Modi had announced the demonetisation on November 8. He has made several speeches after the meeting at Agra on November 21, Delhi on November 22, Punjab on November 25 and the Mann ki Baat on November 27. He repeatedly said that the demonetisation would make India shine like gold, that the poor will get benefits et al. But in all these speeches, Modi did not admit to what he told KCR on November 19, that he had blundered with demonetisation. Nor has he uttered a word in a discussion in Parliament’s winter session, leading to the opposition forcing adjournments demanding his presence and his statement.

Here’s what leading magazines and newspapers of the world had to say about demonetisation:

The Economist: India’s “demonetisation” is a cautionary tale of the reckless misuse of one of the most potent of policy tools: control over an economy’s money. Demonetisation will probably make only limited strides in shrinking the black economy while affecting all of India’s 1.3bn citizens, the poorest most of all. (December 3)

The Financial Times: Will this demonetisation move sound the death knell for dirty money?

On its own, not a chance. Indian authorities have already released new high-denomination notes to replace the obsolete ones. This new currency, while harder to counterfeit, will soon become a vehicle for new undocumented transactions. As one commentator noted, demonetisation is like liposuction: it represents a one-time reduction in body fat. But if the body wishes to maintain its new physique, a healthy diet and regular exercise are required. (November 28)

The Wall Street Journal: Cash is vital to the Indian economy because it allows people to escape the crushing weight of state bureaucracy. Reduced reliance on cash could be a useful indicator that Mr Modi’s reforms are succeeding. But punishing Indians for their rational preferences will only backfire economically and politically. (November 16)

The Guardian:The scale and speed of Mr Modi’s scheme has more in common with the failed experiments of dictatorships which led to runaway inflation, currency collapse and mass protests. While Mr Modi campaigned to end corruption, it would have been better if the government had updated its antiquated tax system to realise such a task. (November 17)

The New York Times: Demonetization was ostensibly implemented to combat corruption, terrorism financing and inflation. But it was poorly designed, with scant attention paid to the laws of the market, and it is likely to fail. So far its effects have been disastrous for the middle- and lower-middle classes, as well as the poor. And the worst may be yet to come (November 27)

China Daily: India’s sudden move of scrapping currency notes of higher denominations to curb the menace of black money seems to be a nightmare for the country’s poor and the middle class. (November 13)

Former US treasury secretary Larry Summers in the Washington Post: We strongly suspect that those with the largest amount of ill-gotten gain do not hold their wealth in cash but instead have long since converted it into foreign exchange, gold, bitcoin or some other store of value. So it is petty fortunes, not the hugest and most problematic ones, that are being targeted.

qutub_mamajiwala wrote:Even the chairmen of various banks had no idea about demonetisation till the prime minister announced it on television.

Except Modi's chamcha, the encounter specialist Amit Shah, Adanis and Amabanis, no one had any idea about demonetisation till Feku announced it on television. In fact, the 8th November speech itself was pre-recorded as per Satyendra Murli of Door Darshan which ironically is a government owned channel !

It has come to light that ahead of Prime Minister Narendra Modi's rally in Varanasi on December 22, RBI has delivered a truckload of new currency in the region

After the scrapping of Rs 500 and Rs 1,000 currency notes by the Modi government in the nation, several districts of eastern region are still suffering from the cash crunch.

It has come to light that ahead of Prime Minister Narendra Modi's rally in his constituency on December 22, the Reserve Bank of India (RBI) has delivered a truckload of new currency at banks and ATMs of Varanasi.

The move is expected to bring relief to people of Varanasi and nearby regions. As per reports, two trucks filled with new currency denominations of Rs 500 and Rs 2,000 were sent to Varanasi to ease the cash crunch.

It is speculated that the total amount of currency brought here is nearly Rs 2,000 crore and the regions including Chandoli, Gazipur, Jaunpur, Azamgarh, Baliya, Mau, Mirzapur, Bhadohi and Sonbhadra will benefit from this move.

Nearly 140 boxes of new currency were delivered at the Babatpur airport here and they the bank officials were told of the division. The new currency was then loaded in trucks and further sent to various bank branches. Sources told that 140 boxes consisted of more than Rs 1,000 crore of new currency.

The effects are for all to see, but Prime Minister Narendra Modi is yet to own up responsibility.

With almost four-fifths of the 50-day period to deposit scrapped Rs 500 and Rs 1,000 notes gone and with the grievousness of the demonetisation injury apparent, the Panchatantra tale of the devoted monkey who cut off his royal master’s nose to get rid of a pesky fly that threatened his slumber comes to mind. Even more to the point is the common warning against a needlessly self-destructive over-reaction to a problem: Don’t cut off your nose to spite your face. It is a warning against acting out of pique, against pursuing revenge in a way that would damage oneself more than the object of one’s anger.

In the Bhagawad Gita (Chapter 2, Verse 63), Krishna tells Arjuna, “From anger arises infatuation; from infatuation, confusion of memory; from confusion of memory, loss of reason; and from loss of reason, one goes to complete ruin.”

There is not even the slightest sign that Narendra Modi has realised the massive screw-up his demonetisation policy has turned out to be. When you abruptly withdraw high-denomination currency notes that make up 86% of the cash in circulation, or Rs 14.2 lakh crores, one would expect proper arrangements to have been made to replace them. Clearly, the government was unprepared. It had very few Rs 2,000 notes rolling out of its security presses, and no additional small-value notes to pick up the slack somewhat. The resultant cashlessness has cost the national economy hugely and devastated tens of millions of livelihoods.

The average daily wage in India is Rs 272, which means it is essential for a typical family to have a good part of that to escape starvation every day. Of the vast reservoir of over 415 million employed in the unorganised sector, about half are engaged in the farm industry, and another 10% each in construction, small-scale manufacture and retail. These are almost all daily-wage earners. Just visualise the cold hearths in these homes and children going to bed hungry. There are harrowing stories from all over the country, and the prime minister’s propagation of electronic payments and mobile banking has the air of asking starving people to eat cake instead.

The loss due to this unprecedented drop in production and income to the economy this year is expected to be around 2% of gross domestic product – that is almost Rs 2 lakh crores. The cost of printing replacement notes is expected to be between Rs 40,000 crores and Rs 50,000 crores.

Failed theories

The prime minister made out that demonetisation would mean the extinguishing of black money and all that did not come back to the banks would be its bonus. Neither theory is being borne out. The apprehension of hundreds of crores in new pink Rs 2,000 notes from all across the country, by the police as well as income tax authorities, is proof enough of that. It just proves that new money turns just as easily into black money as the old money, and nothing has changed.

But there is a larger reality. Of the Rs 14.2 lakh crores in high-denomination notes, Rs 13.2 lakh crores has come back into the system. There are 10 days still to go and it looks like Modi’s bonus will not be much. On Monday, the government announced that banks won’t be accepting more than Rs 5,000 per person in the old notes for the rest of this season of Modiness.

The incidence of counterfeits, too, was hugely exaggerated with the Reserve Bank of India stating that only 0.0006% of the money banks handle are counterfeit, with a value of Rs 29.6 crores out of the total Rs 16.4 lakh crores in circulation.

One hopes that Modi will finally realise that only 4% of the black money is kept as cash. The rest is abroad or in property or bullion. Last year, his government allowed the import of about 1,000 tons of gold, and the research body Global Financial Integrity estimated the illicit export of $83 billion in 2014. Clearly, the regime was barking at the smallest of the trees.

In recent days, the prime minister has changed his avatar from corruption fighter to pitchman for electronic payments. One cabinet minister told me that he constantly asks all his ministers if they have PayTM in their mobiles.

But there are costs to this also. The average life of a Rs 100 note is estimated to be about a year, involving between 500 and 1,000 exchanges. Every credit card or debit card or even PayTM transaction entails charges of about 2%. The merchant typically passes this on to the customer. So the charges entailed during the average lifespan of a Rs 100 note would be between Rs 1,000 and Rs 2,000. The mobile telephony charge would be about 20 paise per minute. So, think of it as an average of Rs 100-Rs 200 per Rs 100 lifespan. And a replacement note with transportation and distribution costs will not be more than Rs 5. How does this economics look to you?

But the prime minister does not seem to see it. The irony of this in a country where the average daily wage is Rs 272 and where not more than 30% have smartphones cannot be missed. But then, Modi doesn’t have uses for history, understanding of economic costs, and awareness of the consequences of policy. He is a go-getter. But going where?

Right from the beginning I have refused to accept demonetization as a fight against black money.

By saying that demonetization is alright but the manner of its implementation is not right, the opposition parties are fooling the public. They think they are safe by adopting an opportunistic position though they know the measure in itself is not good for the country. Unable to stand up to the Prime Minister’s propaganda machinery which has been propagating that demonetization is to fight corruption they have decided not to go against that current being afraid that their standing with the people would further decline.

Demonetization cannot put an end to black money. There is no big black money in cash. It is in banks, estates, gold and jewelry. Political parties, corrupt government officials, lawyers, doctors, traders or builders, might keep some black money in cash, but more than 90 percent is in the form of gold, real estate, foreign accounts and used in consumption or business expenditures.

It is here the state should fight against black money if it is serious.

It is an assault on people’s life and resources

Let us be clear that demonetization is an assault on people’s hard earned cash, livelihoods and dignity. It has not affected the rich and the powerful at all because 1 percent of India has 56 percent of the country’s wealth and 76 percent of its wealth is in the hands of 10 percent people. India is one of the most unequal countries in the world. It is in the top 10 percent that black money rests. Should 90 percent of people be made to pay for punishing the guilty 10 percent?

What is worse is that the money of the poor is now being rationed to people by government. We cannot draw our own money which is required for livelihood. This is an attack on the right to livelihood and life. The poor do not have money to live. The inconvenience is turning into anger and may soon lead to violence if right measures are initiated without delay.

How foolish is that statement that people should go through short-term pain for long term gain? The poor have been at pains all through and political parties have fooled them all. It would serve little purpose to recount stories of difficulties faced, or tragedies experienced, by people without money in hospitals, pharmacies, and bank queues. More than 100 people have dies standing in lines at banks and ATMs to get their own money. There are hundreds of others whose deaths are officially not recorded had to die because they had no cash. There is widespread distress in rural areas and much hardship in towns and cities. Should the poor be made to pay this price when the rich are least affected?

A cashless economy is death of the informal sector

After fooling them on the real intentions of demonetization the Prime Minister has begun talking about cashless economy to fight corruption, another fraud on the people.

Let us examine the facts. We have just 53 percent of adults with bank accounts, but two-fifths of these accounts are dormant. Only 15 percent of existing bank accounts are used to make or receive payments. As many as 250 million bank accounts were opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY Prime Minister’s People Money Scheme) during 2014-2016 and another 250 million accounts were opened, of which 60 million accounts have zero balances even now. More than half our population has no access to the banking system. More than 95 percent transactions in the country are in cash.

In rural India the density of banks and ATMs are less. The entire informal economy functions on cash both in rural and urban areas. Beginning with construction, wholesale retail trade, hotels and restaurants, domestic services, transport, and small-scale manufacturing—where sales and purchases are mostly in cash and so are wages. How can the country then move into cashless economy? The plan of the Prime Minister seems to be to get rid of the informal economy and turn the country into a fully corporate economy creating loss of thousands of jobs and loss of livelihoods of millions.

The Poor have no cards

In the name of cashless economy is the Prime Minister trying to make the country cashless? Those who have cards have huge cash in the banks and other assets. The cardless are the poor. Why should they switch over to a cashless economy? Such institutional force is against personal freedom.

If cash remains scarce for long, it could turn into violence. People are at break point. The rich, the corporates and the political parties in nexus with state power are looting the wealth of the poor and the average citizens. In spite of demonetization look at the scams – money in crores (millions) in new currency discovered in raids of members of political parties, bureaucrats and those close to the centers of power reported in the media every day since demonetization.

The rich have not changed their lifestyles. Look at the posh weddings of the political class and their extravagant life styles. Contrast this with deaths and sufferings of people at the banks, hospitals and markets. How long will people be silent? Will the Opposition parties at least now denounce the entire demonetization process and educate the people. The Modi Government should not be allowed to get away with its outrageous falsehood and propaganda about demonetization. We need a surgical strike to expose every false claim and nail every lie of the ruling regime.

In this age of fiscal confusion, RBI does not have a Dy Governor. Either the vacancy created by Urjit Patel' ascent pertains to a useless position that need not be filled in a hurry (then what exactly was Patel doing in that job?), or he is still managing his previous responsibilities. In that case, who is doing the Guv's job ? No one, if you go by the currency chaos.

Meanwhile, the biggest investor institution, LIC, is headless for quite some time. That means the company that insures the nation, and invests in the nation (No. 1 on both) counts for little in the scheme of things of the government.

Is anyone therefore surprised at the state of the economy and where it is heading ?

Hours after Prime Minister Narendra Modi and his cabinet colleagues tried to placate Bharatiya Janata Party leader LK Advani who had publicly expressed his anguish at the prospect of a total washout of the winter session of Parliament, party president Amit Shah on Tuesday failed to control his temper in the meeting of BJP’s national office-bearers as many of them expressed their misgivings and described the negative fallout of the government’s decision on November 8 to withdraw high value-currency notes.

“Amit Shah lost his cool as the majority of national office-bearers of the party reported that the demonetisation had backfired, What in particular made him [Shah] very upset was the view of some of the participants that party might not have faced such a serious crisis had Modiji gone for wider consultations before taking the decision.”

“One of the participants went to the extent of saying that the party’s image has started getting tarnished along with the image of Modiji because of the government’s demonetisation decision and that the government would have to do rapid course correction in order to win back the confidence of the people.”

Apparently the negative feedback of party’s office-bearers irked Shah so much that he is said to have lost his temper. “He shouted at us and directed us to make Modiji’s historic decision a success,” said the BJP general secretary.